New core banking technologies built on a service-oriented architecture (SOA) are generating tremendous business advantages for the financial services industry. Institutions are reaping the benefits of better cross-channel capabilities, the ability to leverage legacy systems longer and the advantage of aggregating risk and better mitigating fraud. They also operate more efficiently and have a leaner cost structure.
Unlocking the silos
In fact, SOA appears to be the answer to many of the stubborn technology problems that financial institutions have struggled with for years. Using the open SOA programming standards originally developed to enable internet-based commerce, back-office systems can connect and work seamlessly with each other and with banking applications. This unlocks products and bank customers from individual processing silos and allows information to be shared across the enterprise.
SOA allows institutions to redeploy product processors as utilities that are presented as ‘services’ to the business channels, so core systems can utilise any published service and participate in seamless electronic message exchanges between applications. These services are able to communicate with a variety of platforms, middleware components and legacy systems using the open services standard associated with the SOA architectural style.
Since SOA uses data and messaging standards to communicate with the services it calls, adding new services is quick and relatively inexpensive. In addition, business process management (BPM) allows the bank to determine exactly how changes associated with new services will affect the enterprise.
SOA also allows business managers to modify processes easily – in one channel, at a single location or across the entire organisation. It offers the flexibility to test new procedures and service providers before company-wide deployment, and makes it possible for banks to get to market faster with new products, while allowing them to conduct pre-launch testing at a lower cost.
Institutions that leverage SOA and communication standards, as well as rules and workflow, are now able to develop pricing engines, product packaging and business processes that focus on their customers’ total relationship with the bank, including business lines that have traditionally been considered silos.
By providing banks with real-time sharing of customer information and products across multiple delivery channels, SOA unlocks the business potential once trapped in legacy systems. The ability to seek out and access customer data about accounts, channel use and product preferences from across the enterprise gives financial institutions the power to increase wallet-share (the amount of business you get from an existing customer) and measure the cost of doing business at the granular level.
Meeting customer needs
Data access also drives down the bank’s transaction costs since each customer activity no longer has to be repeated in every business silo. Even though some channels may not be consistently available for all products, fulfilment processes can still be streamlined and efficient, offering a high level of service quality and faster reaction times to customer needs.
Effective consolidation in the banking industry has been hampered by the high cost of integrating new businesses into existing enterprises. Merger synergies have been difficult to achieve, largely because of these integration challenges, and a number of company combinations have yet to perform as expected. However, SOA can mitigate the risk of sky-rocketing integration costs by providing a naturally open architecture designed to interact with disparate systems in an orderly way.
The architecture also makes it easier and less costly to integrate technology platforms within the organisation, and offers the first viable solution for low-risk legacy migration. By deploying a middle-tier architecture that enables financial institutions to connect their back-end core application systems with any front-end channel solution, pricing, product and process functionality can be pushed into the middle tier, enabling business lines to dynamically change parameters as needed.
This does not mean that institutions must make significant changes to their existing legacy applications. In effect, these systems are transformed by an SOA environment, yet the core system remains intact. It is the interim ‘best of both worlds’ that gives banks the power and flexibility of standards-based technology now while they introduce their next generation of real-time core applications.
Ultimately, SOA enables front and back-end systems to be integrated into a middle-tier architecture that eventually will give financial institutions the ability to ‘unplug’ their proprietary legacy applications and ‘plug in’ to highly scalable transaction processing utilities – within or even outside the walls of their own institution.
Flexible and scalable
SOA offers banks a remarkable level of agility, flexible performance, long-term scalability and an unparallelled view of the enterprise and its customers. By losing many of its technology constraints, the business of banking can be more innovative, customer-centric, streamlined and profitable. SOA offers this and much more.
As the foremost platform for contemporary business automated solutions, a web services and SOA environment packs a tremendous amount of power to transform financial institutions and change the way they model their business. Once institutions decide to integrate SOA into the enterprise, they will embark on a journey that leads to a versatile, highly adaptive automation environment.
However, grasping the full potential of SOA is critical to maximising its benefits. The transition to a service-oriented enterprise must be well planned, implemented thoughtfully and tested along the way.
But with a solid SOA strategy in place, and a clear vision of how the institution will leverage the architecture, bankers will be able to deliver compelling value and high performance to their shareholders, employees and customers – and will also take their industry into the future.
Frank Sanchez is president, Banking Division, Fidelity National Information Services.
